Page 46 - July-August 2018 GSE Report Flip Book

FANNIE MAE AND FREDDIE MAC JJUALN. U- ARUYG. 22001188
Fannie Mae predicts 3% growth in 2018 despite weakness in the housing market
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HOUSING
Fannie Mae predicts 3% growth in 2018 despite weakness in the housing market
Fannie Mae’s Economic and Strategic Research Group revised upward its full-year 2018 economic growth forecast to 3.0%—up from 2.8% in the prior forecast—on expectations that third and fourth quarter inventory restocking will outweigh slowing consumer spending growth and a decline in
net exports, according to the August 2018 Economic and Housing Outlook. Risks from the United States’ trade policy, fading fiscal policy impacts and tightening monetary policy are central to Fannie’s 2.3% growth projection for 2019.
“Breakneck headline growth in the second quarter disguised a detail largely responsible for
the latest upward revision to our full-year growth forecast: a need to restock declining business inventories, which we expect will support greater growth amid weakness elsewhere,” said Fannie Mae Chief Economist Doug Duncan. “Housing continues to drag on growth due to lackluster homebuilding activity, home sales, and brokers’ commissions; and its overall weakness likely reflects continuing inventory shortages, rather than a decline in demand. [Emphasis supplied.] While meaningful wage growth remains elusive, the labor market is strong and inflation appears to be gaining additional steam, making a Fed rate hike in September highly likely. Assuming consumer and business confidence can steer clear of escalating trade tensions, we expect the Fed to raise rates two more times in 2018, including next month.” (Press Release, Fannnie Mae, 08/16/18)
“Job growth is stronger, the quality of jobs that are being added is better, and incomes are rising,” said Mark Vitner, Wells Fargo Securities’ Managing Director and Senior Economist. However, the current housing market has not caught up, and remains the economy’s “most troubling” factor, according to Vitner. “The recovery in housing has been very slow to get back on track. The numbers are all moving in the right direction, they’re just not moving very quickly. I do think housing will get stronger later this year. (CNBC, Mark Vitner, 09/29/18)
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